Anglo American plc · LSE:AAL
Anglo American — Investor Day (2018)
65 slides from Anglo American's investor day presentation, 2018
Slide 1: Our Copper Business
OUR COPPER BUSINESS WORLD CLASS ASSETS, LEADING CAPABILITIES AND ATTRACTIVE GROWTH OPTIONS DUNCAN WANBLAD, CEO BASE METALS Real Mining. Real people. Real Difference 1
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc (“Anglo American”) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following con
Slide 3: What You Will See and Hear This Week
WHAT YOU WILL SEE AND HEAR THIS WEEK Assets Capabilities Returns Three world class assets, each Our people driving relentlessly to A highly competitive business with with significant endowment best in class operational options that provide leverage to a optionality performance, innovation and fundam
Slide 4: What You Should Take Away
WHAT YOU SHOULD TAKE AWAY… Portfolio strength ~1Mtpa Production ~120c/lb Future C1 unit cost (post Quellaveco) A transformed business ~660kt 2018 production guidance Q2 C1 unit cost: Lowest since 2010 with more to come… Continuing delivery ~640ktpa Average production 135-140c/lb 2019 C1 unit cost 20
Slide 5: Experienced Leadership Team
Duncan Wanblad CEO Base EXPERIENCED LEADERSHIP TEAM Metals Functions Operations Quellaveco Ana Elisa Louis Irvine Hennie Tom Morgado Executive Faul McCulley Executive Head of CEO CEO Head of HR Strategy & Copper Quellaveco Base Metals Business Development Aaron Puna Alex Patricio Christoff Executive
Slide 6: Copper Business Overview
COPPER BUSINESS OVERVIEW DUNCAN WANBLAD, CEO BASE METALS 6
Slide 7: Safety Is Our Number One Priority
SAFETY IS OUR NUMBER ONE PRIORITY One of the best safety performances in the Chilean copper mining industry 4.0 3.5 TRCFR(2) 3.0 2.5 LTIFR(1) 2.0 1.5 1.0 0.5 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Occupational health – new cases(3) Significant en
Slide 8: World Class Assets
WORLD CLASS ASSETS Los Bronces Collahuasi 52mt Contained Copper Resources(5) 3rd Largest endowment in the world • 2018 forecast production: ~365kt • 48mt of contained copper in Exclusive Mineral Resources and • Significant future growth optionality 30mt in ore reserves(5) • Contained copper in miner
Slide 9: Combined With Our Leading Capabilities
COMBINED WITH OUR LEADING CAPABILITIES Safety and sustainability Anglo American Operating Model • Safety is our number one priority • Healthy environment • Thriving communities • Trusted corporate leader Innovation, technology & digitalisation Marketing • Concentrated Mine • Waterless Mine • Market
Slide 10: A World Class Copper Business
A WORLD CLASS COPPER BUSINESS ~1Mt ~120 c/lb Production post ramp up of Quellaveco Cost position Production (kt) C1 unit cost (c/lb) +52% -14% ~1Mt ~140c/lb ~120c/lb ~660kt 2018F Future state 2018F Future state 10
Slide 11: Leverage to a Highly Attractive Commodity
LEVERAGE TO A HIGHLY ATTRACTIVE COMMODITY Wide range of applications make copper a Global development and diversity of key material throughout the economic applications expected to support future development cycle demand growth World Copper Usage Split (%)(7) Coper demand to come from a number of di
Slide 12: Copper Mining Is Increasingly Challenging
COPPER MINING IS INCREASINGLY CHALLENGING Ore grades are declining and copper mine supply is stagnating Mined copper supply gap (Mt Cu)(8) 24 Demand Available from base mines 23 5.6Mt of new 22 production capability needed from 21 greenfield projects 20 19 18 17 16 15 14 2010 2020 2030 12
Slide 13: Industry Supply Challenges Are Increasing
INDUSTRY SUPPLY CHALLENGES ARE INCREASING Supply side challenges… …driving reduction in investment in new capacity 1 Limited new supply options Incremental copper capacity from new projects vs. capital investment (9) • Few new porphyry deposits • Capital intensity and capital constraints kt $m 800 1
Slide 14: Sustainability at the Heart of Our Business
SUSTAINABILITY AT THE HEART OF OUR BUSINESS Trusted corporate leader Thriving $ communities OPERATIONAL FEWER ACCESS TO GROWING EFFICIENCY SURPRISES RESOURCES RETURNS Healthy Improved Additional Positioned as environment productivity and development partner opportunities resource efficiency More con
Slide 15: Ambitious Plans to Make a Real Difference
AMBITIOUS PLANS TO MAKE A REAL DIFFERENCE Reducing our carbon footprint... Organisational culture and awareness 30% Reduction in greenhouse gases(10) Energy & Carbon Management System & Digitalisation Renewable Energy Sources 30% Reduction in energy use(10) Innovation and Technology 15
Slide 16: Water Management Is Critical in Mining
WATER MANAGEMENT IS CRITICAL IN MINING Increasing competition and business risk Our strategy • Water scarcity exacerbated by climate change • Risk-based water management • Greater competition for supply • Transparent reporting • Increasing stakeholder engagement required • Engagement with local and
Slide 17: A Multifaceted Approach to Water Sustainability
A MULTIFACETED APPROACH TO WATER SUSTAINABILITY Recycling more Consuming less Technology & Innovation 75% 50% Coarse particle recovery Water reuse by 2020, Dry tailings Fresh water increasing to 100% by 2030 abstraction by 2030(11) Tailings dam underdrainage Retention Evaporation 153bn Gallons used
Slide 18: Improving Lives of Those in Our Local Communities
IMPROVING LIVES OF THOSE IN OUR LOCAL COMMUNITIES Enterprise Employment Education • SME support • Employment support • Ambassadors programme Provides training, advisory and Increase job prospects with local Over 950 employees / 330 projects funding ~75,000 entrepreneurs companies, 1,300 people suppo
Slide 19: Value Accretive Growth Optionality
VALUE ACCRETIVE GROWTH OPTIONALITY DUNCAN WANBLAD, CEO BASE METALS 19
Slide 20: A Balanced Approach to Capital Allocation
A BALANCED APPROACH TO CAPITAL ALLOCATION • Potential for growth is there but under the right circumstances and always based on value Discretionary Cash flow after capital options sustaining • Maximising returns on existing capital capital base is the first priority • Growth opportunities are focuse
Slide 21: Scale and Organic Growth Optionality
SCALE AND ORGANIC GROWTH OPTIONALITY Three of the largest endowments worldwide Growth options from existing reserves and with an average reserve life of 40 years huge upside potential from Quellaveco Reserves and Exclusive Mineral Resources (Mt)(5) Mined copper production vs. resource base(12) 50 48
Slide 22: A Uniquely Positioned Copper Business
A UNIQUELY POSITIONED COPPER BUSINESS A step change in volumes… …an improved cost position Copper production (kt) (13) C1 unit costs (c/lb) 1,400 1,200 1,000 800 2014 2018F 600 2025 400 200 0 2020 2025 2030 2035 Q1 Q2 Q3 Q4 El Soldado Quellaveco Los Bronces Sakatti Collahuasi 22
Slide 23: Quellaveco – A World Class Copper Project
QUELLAVECO – A WORLD CLASS COPPER PROJECT Attractive returns Focus on execution Successfully syndicated Low cost with significant Strong local support and all Extending a long-standing potential key permits in place relationship, confirms asset’s value IRR Payback Consideration > 15% 4 years $600m R
Slide 24: Los Bronces – Significant Growth Optionality
LOS BRONCES – SIGNIFICANT GROWTH OPTIONALITY Current state Growth options Future state Production (2018F) • Abundant high grade ore Production Los Bronces ~365 ktpa Underground • Mine life extension to 2065 400-500ktpa • Permit submission in Q1 2019 C1 Cost (2018F) • Reduced mine interference C1 Cos
Slide 25: Collahuasi – Plant Expansion Options
COLLAHUASI – PLANT EXPANSION OPTIONS Number of expansion options available • 170ktpd 1,100 Copper production (kt) (100%) Existing licence allows throughput of up to 170ktpd, from existing levels of 155-160ktpd prior to 2020 1,000 900 • 210ktpd 800 Investigating options to expand concentrator through
Slide 26: Longer-Term Growth Options
LONGER-TERM GROWTH OPTIONS Sakatti Los Bronces District • Located in Finnish Lapland, in an established • Located adjacent to proven production assets mining district, close to infrastructure • Synergies with existing infrastructure • Smaller high grade ore body • Attractive mineralisation • Pre-fea
Slide 27: Discovery & Geosciences
DISCOVERY & GEOSCIENCES TRANSFORMATIVE VALUE THROUGH DISCOVERY DAVID FINCHAM, EXPLORATION VICE PRESIDENT, AMERICAS 27
Slide 28: Discovery: Superior Value and Risk Diversification
DISCOVERY: SUPERIOR VALUE AND RISK DIVERSIFICATION Value focused Geographies Deposits that can deliver Diversification of risk high cash flows and optionality New search spaces - Frontier & undercover Projects that can be built in District-scale positions capital efficient ways (1,000 to >10,000km2)
Slide 29: Prospective Districts in Diversified Geographies
PROSPECTIVE DISTRICTS IN DIVERSIFIED GEOGRAPHIES Brazil Cu-Au Prime position secured, >40,000km2 under application Southern Africa Cu-Co Ecuador Zambezi W, >10,000km2 secured Brazil Zambezi W Quellaveco Mt Isa S Los Bronces Mogalakwena Australia Cu Mt Isa South, >7,000km2 under application High-Prio
Slide 30: Los Bronces and Quellaveco Near Asset Projects
LOS BRONCES AND QUELLAVECO NEAR ASSET PROJECTS • Airborne geophysics flown over both districts to identify high concentrations of sulphide minerals • Structural interpretations key to understanding potential location of economic mineralisation • Geochemistry and geology to refine targets • Focused a
Slide 31: Brazil Greenfields Cu – An Emerging Frontier
BRAZIL GREENFIELDS CU – AN EMERGING FRONTIER • Emerging Frontier Cu-Au district with over 40,000 km² under application in Mato Grosso and Pará states • Our largest greenfield land package; a first-mover advantage • New discovery concept: >1 billion year old large-tonnage porphyry Cu-Au • Drilling at
Slide 32: Southern Africa – Exploring Base-Metal Frontiers
SOUTHERN AFRICA – EXPLORING BASE-METAL FRONTIERS • Large land holding (>10,000km2) located in Zambezi West, Zambia, in the western extension under cover of the world class Central African Copper Belt • Prospective for large tonnage Cu-Co deposits • 20 to 300m of “Kalahari” sand cover • The right roc
Slide 33: Mt Isa South – A New Generation Undercover Play
MT ISA SOUTH – A NEW GENERATION UNDERCOVER PLAY • Currently > 7,000 km2 of tenure under application Mt Isa Cu-Co-Zn-Pb-Ag deposit • Exploring for superior-grade copper deposits undercover; e.g. a repeat of Mt Isa Cu (300Mt @ 3% Cu) is one of the most attractive high grade targets on the planet, even
Slide 34: Ecuador – Rapidly Emerging Superior Value
ECUADOR – RAPIDLY EMERGING SUPERIOR VALUE PORPHYRY BELT • Emerging Porphyry Cu-Au (Mo) province • Cascabel (SolGold) and Llurimagua (ENAMI/CODELCO) indicates potential for high-grade Cu-Au (Mo) systems • Earn-in agreement completed with Luminex for the Pegasus project • Pegasus is a >650km2 district
Slide 35: Summary
SUMMARY • Value-focused, agile exploration in diverse geographies underpinned by innovation • Applying new approaches and concepts in our near-asset and greenfields portfolios • Robust greenfields project pipeline with district-scale positions focused on highly prospective provinces 35
Slide 36: Operational Performance: A Transformed Business
OPERATIONAL PERFORMANCE: A TRANSFORMED BUSINESS DUNCAN WANBLAD, CEO BASE METALS CONFIDENTIAL 11 36
Slide 37: Anglo American Operating Model: A Differentiated Approach
ANGLO AMERICAN OPERATING MODEL: A DIFFERENTIATED APPROACH Apply a manufacturing approach to Work that is planned, scheduled and mining, through organised and efficient properly resourced is safer and delivers planning and execution of work consistently and at a lower cost Further improvements implem
Slide 38: A Relentless Focus on Efficiency
A RELENTLESS FOCUS ON EFFICIENCY Los Bronces performance metrics Mining Processing Mine compliance (%)(14) Confluencia Plant operating time (%)(14) +21% +3% 97% 96% 76% 93% 2014 2018 YTD 2014 2018 YTD +19% +19% Shovel performance(14) Molybdenum production(14) 38
Slide 39: More Productive and Cost Efficient
MORE PRODUCTIVE AND COST EFFICIENT Copper business unit Productivity Unit costs Copper production per person(15) C1 unit cost (c/lb) 31% (17)% 84 169 ~140 64 2014 2018F 2014 2018F 39
Slide 40: Higher Returns and Improved Margins
HIGHER RETURNS AND IMPROVED MARGINS Copper business unit ROCE (%) EBITDA margin (%)(16) 11% 15% ~20% ~45% 18% 41% 39% 16% 6% 31% 3% 27% 2014 2015 2016 2017 2018F 2014 2015 2016 2017 2018F 40
Slide 41: And a Significantly Improved Competitive Position
AND A SIGNIFICANTLY IMPROVED COMPETITIVE POSITION Lowest copper unit costs for over a decade Anglo American 2025 2018F 2014 Peer 1 2014 H118 Peer 2 H118 2014 Peer 3 H118 2014 Peer 4 2014 H118 Q1 Q2 Q3 41
Slide 42: To Deliver Enhanced Shareholder Returns
TO DELIVER ENHANCED SHAREHOLDER RETURNS Production (kt) C1 unit costs (c/lb) Previously Previously Previously New Previously New 630-660 600-660 600-660 guidance ~145 guidance 620-680 147 ~660 630-660 590-650 ~140 579 135-140 2017 2018F 2019F 2020F 2021F 2017 2018F 2019F 42
Slide 43: Redefining Mining Through Innovation
REDEFINING MINING THROUGH INNOVATION AARON PUNA, EXECUTIVE HEAD OF TECHNICAL & SUSTAINABILITY 43
Slide 44: Innovation Is Needed to Ensure Sustainability
INNOVATION IS NEEDED TO ENSURE SUSTAINABILITY Then Now Future state 1900 2018 What is required to produce 40kg of copper 24t waste 6m3 water 1t waste 3m3 water 1t ore 10 KWhr 8t ore 160 KWhr 40kg 4% Cu 0.02 Km2 0.5% Cu 100 Km2 44
Slide 45: We Are Taking a Two Phased Approach
WE ARE TAKING A TWO PHASED APPROACH Achieving & redefining Innovation, technology and ‘best in class’ performance digitalisation A more productive, more efficient, sustainable business 45
Slide 46: Focused on the Key Value Drivers
FOCUSED ON THE KEY VALUE DRIVERS Mine Plant Drill Blast Load & haul Crush Mill Float & filter Percentage of 2018F direct cost base, Los Bronces = c.5% cost base >45Mtpa +10% > 94% > 89% Shovel Throughput Operating time Recoveries performance increase 46
Slide 47: Case Study: Electric Rope Shovel Performance
CASE STUDY: ELECTRIC ROPE SHOVEL PERFORMANCE 2017 Best-in-class – 45Mtpa 2017 Anglo Copper – 24Mtpa 20.2 Loading hours 18 3Mt 82 % Double sided load 54 4Mt 109 Shovel payload (t) 84 4Mt 81 % Best operator 40 3Mt 3 Passes per Truck 4 5Mt 7 Shift change (mins) 37 2Mt 47
Slide 48: Case Study: Electric Rope Shovel Performance
CASE STUDY: ELECTRIC ROPE SHOVEL PERFORMANCE Collahuasi Shovel 12 Los Bronces Shovel 10 22% 50% 45 45 19% 37 20% 30 31 25 2017 2018F Best in class 2017 2018F Best in class 2018 2018 • Double side loading increased to 80% • Double side loading increased to 80% • Best operator 80% • Best operator 80%
Slide 49: A Number of Game Changing Technologies
A NUMBER OF GAME CHANGING TECHNOLOGIES >50% Reduction in water intensity Coarse Particle Recovery Dry Disposal >50% Reduction in energy intensity Advanced Shock-break Precision Classify Fragmentation 49
Slide 50: Coarse Particle Recovery: Improved Recoveries
COARSE PARTICLE RECOVERY: IMPROVED RECOVERIES Drill Blast Load & haul Crush Mill Float & filter • Flotation process changed to allow for larger diameter material Technology • Ore is liberated and recovered at a higher grade • Significant increase in throughput Benefits • Solidified disposal material
Slide 51: Coarse Particle Recovery: In Copper
COARSE PARTICLE RECOVERY: IN COPPER Drill Blast Load & haul Crush Mill Float & filter >10% >20% Increase in Operating Decrease in water and Free Cash Flow energy intensity 51
Slide 52: Bulk Sorting: Less Waste to Concentrator
BULK SORTING: LESS WASTE TO CONCENTRATOR Drill Blast Load & haul Crush Mill Float & filter • Uses sensors to determine ore content prior to processing Technology • Gangue is removed using natural heterogeneity of ore bodies • Provides immediate grade assays • Unlocks production capacity by rejecting
Slide 53: Bulk Sorting: In Copper
BULK SORTING: IN COPPER Drill Blast Load & haul Crush Mill Float & filter >10% Decrease in water and energy intensity 53
Slide 54: What Does This Mean for Copper?
WHAT DOES THIS MEAN FOR COPPER? Energy Water Costs Contributing to Group In line with Group target Lower operating costs and energy targets and one step closer to a reduction in mine waterless mine equipment SIB capex >15% >20% >30% Energy Water consumption C1 unit cost 54
Slide 55: Copper Marketing: Leveraging a World Class Production Platform
COPPER MARKETING: LEVERAGING A WORLD CLASS PRODUCTION PLATFORM ALEX SCHMITT, EXECUTIVE HEAD OF MARKETING (BASE METALS) 55
Slide 56: Leading Capabilities and Global Footprint to Identify Market Opportunities
LEADING CAPABILITIES AND GLOBAL FOOTPRINT TO IDENTIFY MARKET OPPORTUNITIES Leading capabilities • Governance • Freight desk • Futures trading • Credit markets • Compliance • Risk management • Performance • Logistics and sales management operations platform Global footprint European Marketing hub Lon
Slide 57: Market Focus: Connecting Copper Sources to End Customers
MARKET FOCUS: CONNECTING COPPER SOURCES TO END CUSTOMERS Value chain ~200kt third party Marketing excellence optimisation trading Cost, cash & inventory Trading margins Market development management 57
Slide 58: Shareholder Focus: Delivering Value Through Market Intelligence
SHAREHOLDER FOCUS: DELIVERING VALUE THROUGH MARKET INTELLIGENCE Marketing levers unlocking value 20%+ 200 EBIT CAGR 2013 to 2018 Active counterparties, up from 50 in 2013 Copper Production Chain Market Intelligence Market intelligence: ‘our window to the world’ Customer Expectations Sector Trends 58
Slide 59: A Vital Industrial Metal…
A VITAL INDUSTRIAL METAL… World Copper Usage Split 2017 (%)(7) World Geographic Split (kt)(7) 19th/20th Century Post WWII Oil shocks, East China electrification Industrialisation Asia fabrication Boom Machinery 10% Europe 20,000 2010s: 2.5% p.a. Transport Buildings N America 11% 31% S America 2000s:
Slide 60: And Now a Vital Lifestyle Metal for the Future
AND NOW A VITAL LIFESTYLE METAL FOR THE FUTURE Increasing urbanisation Generational shift to emission A sustainable greener world improves living standards free transportation options 60% 4x to 12x 4x More electricity required, with “middle More copper used for renewable More copper usage in electri
Slide 61: Leveraging a World Class Production Platform
LEVERAGING A WORLD CLASS PRODUCTION PLATFORM Going beyond ‘dig and deliver’ to add value through: Deep market intelligence guiding marketing, production and investment decisions Third party sourcing facilitating blending and arbitrage opportunities Broadening the offering to customers and providing
Slide 62: Conclusion
CONCLUSION DUNCAN WANBLAD, CEO BASE METALS 62
Slide 63: Building a World Class Copper Business
BUILDING A WORLD CLASS COPPER BUSINESS • Step-change performance delivered • Further improvements committed • Investment to unlock full asset potential • Deliver value-enhancing growth at an improved cost position • Providing leverage to a highly attractive commodity 63
Slide 64: Appendix
APPENDIX 64
Slide 65: Footnotes
FOOTNOTES (1) Managed operations, total Lost Time Injury Frequency Rate per 1,000,000 hours (2) Managed operations, Total Recordable Cases Frequency Rate per 1,000,000 hours (3) New cases of occupational disease. Basis of data changed in 2017 hence no comparable data available for prior years (4) Le